2014 (2) TMI 23 - HC - Income Tax

Penalty u/s 271(1)(c) - Deduction under Section 80P(2) - no claim for deduction was made but it was made by filing the revised return - Held that - Earlier, the deduction in question under Section 80P(2) was being allowed to the assessee, for being a co-operative society engaged in the business of banking and providing credit facilities - By virtue of insertion of Sub-section (4) by Finance Act, 2006 with effect from 01.04.2007 - The provisions of Section 80P were made inapplicable in relation to any Co-operative Bank other than the Primary Agriculture Credit Society or Primary Co-operative Agriculture and Rural Development Bank - The assessee is not entitled to deduction - Relying upon the decision in CIT v. Reliance Petroproducts (P.) Ltd 2010 (3) TMI 80 - SUPREME COURT - The claim for deduction is not sustainable - It is not a concealment of particulars of income or furnishing of inaccurate particulars of income - Decided against Revenue.

Summary

Issues:
- Claim of deduction under Section 80P of the Income Tax Act for the assessment year 2007-08.
- Imposition of penalty under Section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars.
- Appeal against penalty imposition and subsequent decisions by the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal (ITAT).
- Questioning the ITAT's decision by the Revenue.

Claim of Deduction under Section 80P:
The judgment revolves around the claim of deduction under Section 80P of the Income Tax Act for the assessment year 2007-08 by a co-operative society engaged in banking. Initially, the assessee claimed deductions under Section 80P(2)(c)(ii) and 80P(2)(d) in the original and revised returns, respectively. However, due to a change in the law rendering the assessee ineligible for the deduction, the Assessing Officer disallowed the claims. The issue arose when the Revenue questioned the claim made by the assessee, leading to a series of assessments and revisions.

Imposition of Penalty under Section 271(1)(c):
The imposition of a penalty under Section 271(1)(c) was contested by the assessee, arguing that the claim for deduction was a technical error due to an amendment in Section 80P of the Act. The Assessing Officer believed that the deductions were intentionally claimed to reduce taxable income and imposed a penalty. However, the Commissioner of Income Tax (Appeals) found the claim to be bona fide and not an act of concealment or furnishing inaccurate particulars, thereby canceling the penalty. The ITAT upheld this decision, emphasizing that it was a case of a bona fide mistake and not intentional wrongdoing, leading to the dismissal of the Revenue's appeal.

Appeal and Subsequent Decisions:
The Revenue challenged the decisions of the CIT(A) and ITAT, arguing that the claim for deduction was made after filing a revised return and a belated re-revised return, indicating an attempt to reduce taxable income. The Revenue contended that this amounted to furnishing inaccurate particulars of income, justifying the penalty imposition. However, the court found the Revenue's submissions lacking in establishing a substantial question of law. The court reiterated that the claim for deduction was a result of a bona fide mistake due to a change in the law, and the assessee rectified the error by filing a re-revised return upon being informed of the legal position.

Conclusion:
The court upheld the decisions of the CIT(A) and ITAT, emphasizing that the claim for deduction under Section 80P was a genuine mistake by the co-operative society, which rectified the error upon realizing the legal ineligibility. The court cited relevant legal precedents to support the view that a mere unsustainable claim does not amount to furnishing inaccurate particulars, especially when corrected promptly upon notification. Ultimately, the court dismissed the appeal, affirming that the penalty imposition was unwarranted in this case of a bona fide mistake rather than intentional misconduct.